Second sugar scam after questionable sugar tax hike

The government’s decision to increase import taxes on sugar to Rs.50 per kg from 25 cents this week has triggered a second sugar scam (the first one in 2020) and opened another can of worms.

It will incur a loss of Rs. 422 million in tax revenue from the stock of 8500 metric tons of sugar imported by an importer recently as a result of the government’s decision to increase the Special Commodity Levy.

The General Cargo Vessel SEA STELLAR carrying this sugar shipment arrived at the Colombo Port on October 30, official sources confirmed.

This importer has cleared the stock of sugar from Sri Lanka customs two days before the commodity levy hike which came into effect on November 2.

The Extraordinary Gazette issued on Wednesday by the Finance Ministry indicated that the revised levy will come into effect from Thursday (November 2) and will be valid for a period of one year till November 2, 2024.

This importer has paid 25 cent as commodity levy per kilo when clearing the stock of 8500 metric tons of sugar at that time.

Informed sources said that some sugar importers are in the practice of persuading official authorities to revise the commodity levy from time to time and thereafter they are holding on to their stocks to gain maximum profits after the sugar price hike.

Under the new levy, the wholesale price of sugar will go up to Rs. 325 from Rs. 265 earlier.

However the Consumer Affairs Authority was holding discussions with stakeholders to impose a maximum retail price of sugar in accordance with commodity levy hike as soon as possible.

The previous sugar scam in 2020 widely reported by the Business Times and allegedly carried out by well-connected importers cost the state Rs. 15.9 billion in tax revenue, the Ministry of Finance told the Parliamentary Committee on Public Accounts (COPA) in a report submitted in March 2021.

The then Rajapaksa regime was under fire at that time after sugar taxes were cut to 25 cents from Rs.50 a kilo when one trader in particular had imported unusually large volumes of sugar and sold them far above the cleared price.

The opposition alleged that a large commodity trader had made massive profits by selling sugar above the cleared price, and the Treasury had ‘lost ’Rs 15.9 billion in taxes as a result.